General Business Tax Credit (Form 3800)

Key takeaways

• The General Business Credit (GBC) is the combined value of a business’s individual tax credits for a tax year, including carryforwards from earlier years and current-year credits.
• To claim multiple business credits, taxpayers complete the IRS form for each credit and report the total on Form 3800.
• The GBC is generally nonrefundable and subject to income-based limits and ordering rules (FIFO).

What is the General Business Credit?

The General Business Credit is not a single credit but an aggregate of many separate business tax credits that reduce tax liability dollar-for-dollar. Common purposes include encouraging research, hiring, energy investments, and small-employer benefits.

Businesses use Form 3800 to compile the total of their individual business credits and determine the allowable credit for the year.

Common credits included

Examples of individual credits that are typically carried into the General Business Credit:
* Work Opportunity Credit (Form 5884)
* Credit for Small Employer Health Insurance Premiums (Form 8941)
* Employer Credit for Paid Family and Medical Leave (Form 8994)
* Low-Income Housing Tax Credit (Form 8586)
* Disabled Access Credit (Form 8826)
* Credit for Employer-Provided Child Care Facilities and Services (Form 8882)
* Credit for Small Employer Pension Plan Startup Costs (Form 8881)
* Credit for Social Security and Medicare Taxes on Certain Employee Tips (Form 8846)
* Investment credit and other energy-related or employment-based credits

Complete rules and eligibility vary by individual credit.

How to claim the credits

1. Complete the specific IRS form for each individual credit you qualify for.
2. Carry the resulting credit amounts to Form 3800, General Business Credit.
3. Attach Form 3800 and the supporting credit forms to your tax return.

Accounting rules and ordering

• The General Business Credit is generally nonrefundable: it can reduce tax liability to zero, but excess credit is not refunded (subject to carryback/carryforward rules).
• Unused credits may generally be carried back one year or carried forward to future years, subject to rules for specific credits.
• Credits are applied on a first-in, first-out (FIFO) basis:
• Carryforwards to the year (earliest first)
• The general business credit earned in the current year
• Carrybacks to that year
• Some credits may expire or have sunset dates—check the rules for each credit.

Income-based limitation

The amount of General Business Credit allowed in a tax year is limited. The computation generally:
1. Add net income tax and alternative minimum tax (AMT).
2. From that sum, subtract the greater of:
* The tentative minimum tax for the year, or
* 25% of the amount by which regular tax liability exceeds $25,000 ($12,500 for married filing separately, but only if both spouses qualify for the credit).
If one spouse has no current or unused credit, the other spouse may use the full $25,000 threshold when determining the limitation.

Which businesses are eligible?

Small businesses that may qualify include corporations, partnerships, and sole proprietorships with average annual gross receipts of $50 million or less over the prior three tax years (for businesses younger than three years, use the period of existence). Eligibility also depends on the specific credit’s rules.

Practical tips

• Complete each individual credit form carefully; errors can affect the aggregated amount on Form 3800.
• Track carryforwards and carrybacks year to year—credits are applied FIFO and some credits have expiration dates.
• Consult the instructions for each individual credit and Form 3800 for detailed rules and exceptions.

Bottom line

Form 3800 consolidates a business’s individual tax credits into the General Business Credit, allowing businesses to apply multiple targeted incentives against their tax liability. Because of ordering rules, income limits, and different carryback/carryforward treatments for specific credits, careful recordkeeping and attention to each credit’s instructions are essential.